Supplier price is rarely final cost. A carton passes through freight, customs, handling, breakage and storage; a service hour contains preparation, non-billable time and unused capacity. Good costing follows the resource to the sellable unit once and only once.
The seven-step cost file
- Define the object: unit, batch, portion, hour or engagement.
- Choose period and normal capacity.
- Start with net purchases and direct inputs.
- Add attributable charges under explicit drivers.
- Handle loss, reject and non-productive time.
- Prevent overlap between direct cost and overhead.
- Reconcile total cost and date the version.
1. Retail: landed cost per sellable unit
Take purchase price after commercial reductions and add attributable inbound freight, insurance, customs, transit and handling. Allocate by weight, volume, value or units depending on what causes the charge. Remove unsellable units from the denominator so breakage does not disappear.
| Batch of 100 | Amount | Per sellable unit |
|---|---|---|
| Net purchase | MAD 10,000 | — |
| Freight/transit | MAD 1,500 | — |
| Batch cost | MAD 11,500 | — |
| Sellable after 2 broken | 98 | MAD 117.35 |
Dividing by 100 produces MAD 115 and understates cost. Decide separately whether loss is normal cost or an abnormal variance to investigate under the accounting framework.
2. Restaurant: start from real yield
A recipe uses gross quantity, purchase price and yield. One purchased kilo does not always equal one served kilo. Add seasoning, garnish and unit packaging, then compare theoretical with actual consumption. Theoretical food cost alone cannot explain over-portioning, waste, giveaways or missed sales.
| Item | Calculation | Control |
|---|---|---|
| Raw material | quantity × price | Purchase invoice |
| Yield | net ÷ gross | Kitchen test |
| Portion | net cost × quantity | Recipe card |
| Packaging | per order | Channel |
| Actual variance | consumption − theory | Inventory |
Update after supplier, weight or recipe changes. Last year’s correct card can destroy today’s margin.
3. Service: divide by productive hours, not paid hours
Assume MAD 240,000 annual people costs attributable plus MAD 120,000 structure, total 360,000. If the team has 4,000 paid hours but 2,400 realistic productive, sellable hours, capacity cost is MAD 150 an hour, not 90. Add subcontracting and engagement-specific spend.
| Base | Calculation | Hourly cost |
|---|---|---|
| Paid hours | 360,000 ÷ 4,000 | MAD 90 |
| Productive hours | 360,000 ÷ 2,400 | MAD 150 |
Sales, administration, training and leave are not free: they reduce sellable capacity. Measure them without turning human work into intrusive surveillance.
Management cost is not automatically tax cost
The model supports price and capacity decisions. Accounting, deductibility, inventory valuation and VAT follow their own rules and review.
4. Allocate overhead without false precision
Choose a driver explaining consumption: area for occupancy, orders for preparation, machine hours for workshop, revenue only where no better causal driver exists. BelloPOS can supply units, recipes, purchases, sales and stock; payroll, customs, rent and hours come from elsewhere.
- Direct: assign without a driver
- Common causal: allocate by use
- Structure: show as separate margin layer
- Exception: isolate and explain
- Version: date, source and approver
Calculate several layers: direct, variable, landed/productive and full cost. Price and break-even do not always use the same layer; name it.
Mistakes to avoid
- Using supplier list price.
- Dividing by purchased instead of sellable units.
- Ignoring yield.
- Dividing services by all paid hours.
- Adding rent twice.
- Keeping an undated version.
Frequently asked questions
Should VAT be included in cost?
It depends partly on recoverability. Work on a consistent base validated with accounting.
How should freight be allocated?
Use the most defensible driver—weight, volume, value or unit—and document it.
What denominator should a service use?
Realistic productive capacity available for engagements, not simply all paid hours.
How often should cost be updated?
On every material price, recipe, yield, capacity or process change, plus regular review.
Does BelloPOS calculate every cost?
It contributes sales, purchases, stock and recipes by setup; payroll, customs, rent, time and accounting policy complete the file.
What to take away
Defensible cost follows purchase or capacity to the sellable unit, explains every allocation, handles loss and carries a date.
Sources
The figures and rules quoted above come from these pages, read on the date given in the article.
Recalculate one product and one service
Choose your two largest sellers: a small cost error at volume matters more than extreme precision on a rare item.
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